AAC Holdings (NYSE: AAC) and Surgery Partners (NASDAQ:SGRY) are both small-cap medical companies, but which is the better investment? We will compare the two companies based on the strength of their earnings, profitability, analyst recommendations, valuation, institutional ownership, risk and dividends.

Institutional & Insider Ownership

47.9% of AAC Holdings shares are held by institutional investors. Comparatively, 38.4% of Surgery Partners shares are held by institutional investors. 37.3% of AAC Holdings shares are held by insiders. Comparatively, 7.5% of Surgery Partners shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Volatility & Risk

AAC Holdings has a beta of 2.05, suggesting that its share price is 105% more volatile than the S&P 500. Comparatively, Surgery Partners has a beta of 1.71, suggesting that its share price is 71% more volatile than the S&P 500.

Profitability

This table compares AAC Holdings and Surgery Partners’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
AAC Holdings -1.55% 10.70% 4.23%
Surgery Partners 0.63% 6.02% 0.81%

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for AAC Holdings and Surgery Partners, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
AAC Holdings 0 2 1 0 2.33
Surgery Partners 1 1 4 0 2.50

AAC Holdings currently has a consensus target price of $8.50, indicating a potential downside of 6.08%. Surgery Partners has a consensus target price of $20.40, indicating a potential upside of 122.95%. Given Surgery Partners’ stronger consensus rating and higher probable upside, analysts plainly believe Surgery Partners is more favorable than AAC Holdings.

Earnings & Valuation

This table compares AAC Holdings and Surgery Partners’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
AAC Holdings $266.82 million 0.82 $30.06 million ($0.20) -45.25
Surgery Partners $1.13 billion 0.40 $231.39 million $0.15 61.00

Surgery Partners has higher revenue and earnings than AAC Holdings. AAC Holdings is trading at a lower price-to-earnings ratio than Surgery Partners, indicating that it is currently the more affordable of the two stocks.

Summary

Surgery Partners beats AAC Holdings on 8 of the 14 factors compared between the two stocks.

About AAC Holdings

AAC Holdings, Inc. is a provider of inpatient and outpatient substance abuse treatment services for individuals with drug and alcohol addiction. The Company performs drug testing and diagnostics laboratory services and provides physician services to its clients. As of June 30, 2016, the Company operated 12 residential substance abuse treatment facilities located throughout the United States, focused on delivering clinical care and treatment solutions across 1,139 beds, which includes 636 licensed detoxification beds, and 18 standalone outpatient centers. In addition, the Company focuses on expanding The Oxford Centre facility. As of June 30, 2016, the Company’s capacity at its Forterus treatment facility was 14 beds. The Company is engaged in deploying research-based treatment programs with structured curricula for detoxification, residential treatment, partial hospitalization and intensive outpatient care. The Company is also an Internet marketer in the addiction treatment industry.

About Surgery Partners

Surgery Partners, Inc. is a healthcare services company. The Company operates in three lines of business across the United States: Surgical Facility Services, Ancillary Services and Optical Services. The Company’s Surgical Facility Services segment consists of the operation of ambulatory surgery centers (ASCs) and surgical hospitals, which include its anesthesia services. The Company’s surgical facilities primarily provide non-emergency surgical procedures across a range of specialties, which include gastrointestinal (GI), general surgery, ophthalmology, orthopedics and pain management. The Company’s Ancillary Services segment consists of a diagnostic laboratory, a specialty pharmacy and multi-specialty physician practices. The Company’s physician practices include its owned and operated physician practices pursuant to long-term management service agreements. The Company’s Optical Services segment consists of an optical laboratory, an optical products group purchasing organization.

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